Jonathan Sarna, the prominent American-Jewish historian, likens the affluent Orthodox Jewish community of New York where Bernard Madoff found so many of his victims to "a kind of shtetl -- a very wealthy shtetl." Its borders may be the sweeping expanses of Park and Fifth avenues, from the East 60s to the East 80s in Manhattan. But to Prof. Sarna it remains a small insular world, comparable to the ghettos of Eastern Europe, where money and religion blended seamlessly and personal trust was the single most important prerequisite in choosing a life partner.

Or a business partner.

The Madoff scandal has shaken the American Jewish community to its core -- maiming institutions large and small, wiping out life savings and triggering soul-searching: How could one man deceive so many? And what does the affair say about American Jewish values?

The pain is being felt especially intensely in philanthropic circles, which may never fully recover. Some Jewish nonprofits -- such as the Robert Lappin Foundation, which tried to enhance Jewish identity among the young; the Picower Foundation, which funded assorted Jewish medical and cultural causes; and the Chais Family Foundation, which promoted, among other endeavors, educational excellence in Israel -- have shut down. Several large institutions, Hadassah and the American Jewish Congress among them, have been seriously wounded. Then there is the blow to the community's sense of self -- the confidence and prosperity that enabled it to build magnificent houses of worship, Jewish day schools that rivaled the finest secular ones and, more recently, charities with impressively large endowments.

As a resident of the shtetl referred to by Prof. Sarna -- my home is on East 89th Street, albeit toward Second Avenue, the slightly shabbier boundary -- I have watched first-hand the prosperity and confidence, symbolized by the parade of synagogue-goers on a typical Saturday morning. The men wear elegant suits and discreet yarlmulkes; the women don fashionable coats and dresses and elegant hats. Members of this gilded shtetl gather not simply at the opulent "KJ" -- Kehilath Jeshurun -- or the Fifth Avenue Synagogue but at the local kosher butcher store, Park East, which has the intimacy of an old-world meat shop and the prices and gourmet fare to fit the appetites of its upscale customers.

The butcher shop may remain the same, but American Jewish charity has experienced a watershed event. For the past several years, Jewish nonprofits had been relying on "fewer -- but larger -- gifts," according to Jack Wertheimer, a professor at the Jewish Theological Seminary in New York. United Jewish Communities, which represents 157 Jewish Federations across North America, has seen a steep decline in its ranks of donors in the past 20 years -- even as the total funds raised have continued to grow.

In 1988, the Federations, whose amalgam of communal groups support the Jewish elderly, Jewish day schools and other causes, had about 814,000 donors; by 2006, that number had plunged 36.25% to 519,000 donors. The decline continued in 2007, when donors dropped below half a million. The UJC's fund-raising, though rising in real dollars, has actually fallen when factoring in inflation. Larger checks from a few donors have kept the picture from being a lot worse.

The Federations pursued the "top end" of donors, remarks Paul Kane, a senior vice president at the UJA Federation of New York. There was so much wealth out there that it seemed more cost-effective than going after smaller donors. Once upon a time, he recalls, particularly during periods when Israel was at war, grass-roots support was overwhelming: "People would line up outside Federations with their money -- they came out of the woodwork."

But all of that has changed in the era of the megadonor. Some of these wealthy individuals created their own Jewish foundations and philanthropies. "There are people out there who can write six-, seven- and, in some cases, eight-figure checks," says Mark Charendoff, who heads the Jewish Funders Network. His organization, founded 19 years ago, now has some 400 member foundations and individual donors who give out more than $800 million annually to causes that are either Jewish or rooted in Jewish values.

Thanks to Mr. Madoff, Jewish charity may have to return to its roots, becoming once again a widespread communal effort, instead of being concentrated in a few powerful hands.

But would that really be so bad? I don't have a great solution to the Madoff problem or to the damage that it has wrought. I have a more limited suggestion: I would like to see the comeback of the pushke -- the little collection box that was once in every Jewish home. To be sure, I don't want Jewish charities to suffer; it is simply that in our post-Madoff universe I find myself longing for the kind of more humble, more individual tzedakah, or personal charity, that took place before the rise of the uber-Jewish foundations and zillionaire philanthropists.

There was a time when every Jewish family was expected to have a pushke. It was part of a simple and deeply felt tradition of individual giving that called for everyone, even little children, to donate some coins as a show of faith and a commitment to charity. My own home had multiple boxes, and every once in a while, typically on a Sunday, a rabbi would appear to collect the contents and we would start again.

I recall how good it felt when, as a child, I dropped a quarter or a dime into the pushke on Friday afternoon before the Sabbath. I loved the feel of the box when it was full. When I walked on the streets of Bensonhurst, Brooklyn, then a very Jewish area, I would sometimes see women in the street shaking their boxes for favorite causes.

Back then, instead of relying on a few megadonors, the Jewish community relied on donors like my dad. He favored charities in Jerusalem, and regularly would dispense two-figure checks of $10 or $20 to his pet causes -- orphanages, trade schools, even a bride's fund designed to help orphaned girls obtain wedding dresses and veils for their big day.

It would be lovely to see the return of little checks -- the donations everyone could afford to give and often did. Neither they nor the pushkes require the fund-raising galas and the elaborate administrative structures that have become the norm across the Jewish charitable world.

Some Jewish leaders may blanch at my words. Prof. Wertheimer notes that "Jewish organizational life has become much more expensive -- nickels, dimes and pushkes aren't going to do it." Though Mr. Kane at the UJA and others now hint at new strategies to broaden the donor base, some Jewish leaders are ready to return to business as usual, sending the message that we must get in some big checks to replace the money that was lost. But this scandal makes me wish we could remember the values of our shtetl and think small again.

Ms. Lagnado is a reporter for the Journal.

Write to Lucette Lagnado at lucette.lagnado@wsj.com

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